EUR/USD Daily Fundamental Forecast – December 2, 2016

As we have been mentioning over the past few days, EURUSD seems to have found a base near 1.0580 and has been using it to bounce slowly and steadily towards 1.0700 despite periods of dollar strength. Also, this has been helped by the fact that the dollar strength has not been as relentless it was when the US election results got over and the dollar went on a rampage. This week, we have seen dollar having periods of weakness and this has been utilised by other currencies to have some corrections along the way and euro is also trying to do the same.

Yesterday, we had higher yields in the US but still we saw the dollar weaken and this helped the euro reverse its its downward trend and break back through 1.0600 and it has been able to break through certain important levels and now sits at 1.0670 as of this writing. There have been no major economic news out of these regions yesterday which can be considered as a basis for these moves and we can just view this move as a correction of the dollar strength that we have been seeing over the past few weeks.

Looking ahead to today, we have the NFP employment report to come out later on today and this, along with the Fed meeting, are the most important economic events in a month. Traders will expect the trend of improving US data, which we have been seeing over the last few weeks, to continue and this will bolster the hopes of a rate hike not only in December but also in 2017 as well. Right now, the market has already priced in a December rate hike and will hence be looking ahead to guidance on rate hikes in 2017 from the Fed and for that, it is important that the economic data continues to remain strong. If the report does come out stronger than expected, we can expect the pair to test 1.0600 again.